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Tue 6 Jul 2010 04:00 AM

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Legal resolution

Lawyers in the UAE suggest how the anticipated draft federal arbitration law will affect the facilities management industry.

Legal resolution
A service provider’s contractual life-cycle is usually lengthy and can last several years. It is therefore inevitable that disputes over payments or quality of work will arise during that time.
Legal resolution
Clyde &Co associate for Middle East projects Elise Gillians.
Legal resolution
Systech International associate director Philip Adams.
Legal resolution
Kilpatrick Stockton managing partner Tom Wilson.

Lawyers in the UAE suggest how the anticipated draft federal arbitration law will affect the facilities management industry.

The UAE Minister of Economy Sultan Bin Saeed Al Mansouri announced in May that a draft federal arbitration law is expected to be passed this year, which could attract future investment in the region.

Industries are expected to benefit from the new bill, which is set to propose thorough regulation of domestic and international arbitrations and the arbitration process as a whole.

So how will it affect the FM sector?

A service provider's contractual life-cycle is usually lengthy and can last several years. It is therefore inevitable that disputes will arise during that time.

For example, the supplier may not be meeting guaranteed service levels, there may be no agreed guaranteed service levels in the first place and payments may not have been made for the service provider's work.

Arbitration will still be used as a technique to resolve these disputes when the latest bill is approved, but contract lawyers in the Middle East are predicting that the new law will fill in some of the gaps, which have been missing impor-tant guidelines.

"Up until present, different centers of arbitration across the seven emirates have set down their own arbitrary regimes, leading to a great deal of discrepancy and uncertainty for parties in dispute," says Galadari and Associates senior legal consultant for projects and construction Leonora Riesenburg.

Some positive initiatives under the legislation include the incorporation of a fairer process of selection of an arbitrator.

"The parties at dispute are given more sway over the organisation and formation of the panel, with the court of law only having to be called upon to fill any gap that might occur in the case of failure to agree. These provisions seek to redress issues of conflict of interest and integrity in the justice framework," explains Riesenburg.

The new bill will also give parties the right to elect an arbitrator before the work starts, as well as at the time of dispute. Currently, if the client and FM contractor prefer to adopt arbitration as a method of resolving disputes, they must say so when they are negotiating contractual terms.

"This is a wholly new revolutionary concept. In theory the parties will therefore be entitled to vary the original ‘dispute resolution' terms and conditions. In the case of non-agreement the remit will be with the tribunal," she adds.

Another benefit clients and FM contractors can gain from the legislation is that, subject to certain specified exceptions, the arbitration award will be deemed final and binding. This eliminates the risk of court proceedings after the event. Arbitral awards on late payment will therefore bring the matter to a timely close.

The draft law will also make it easier for a Tribunal to extend the time limit on arbitration proceedings, as Clyde & Co associate Elise Gillians explains: "At present, unless the parties agree otherwise, or a court order is obtained extending the time limit, an arbitrator or tribunal must issue its decision within six months. This is rarely desirable, particularly for more complex disputes. The new law allows the arbitrator or tribunal to extend this period without recourse to the court for a further period of up to six months. In terms of practicality, I see this as a change for the better."

The bill is also set to lay down details regarding the procedure that should be followed during an arbitration process, according to Gillians.
"If parties have agreed on arbitration, but have not agreed on a set of arbitration rules which determine the procedure, there will be less room for argument as to how the arbitration is to be conducted. Again, these kinds of disputes lead to wasted time and greater costs for both parties."

In addition, it is anticipated that the draft law will impact foreign arbitration awards and make them more easily enforced against companies in the UAE.

"The draft has not been made public yet, but in general terms, if you have a services company that is based in the UAE and you are a foreign entity who has a management contract or supply contract and you wish to have any disputes with that company determined by arbitration outside of the UAE, then the new law may make it easier to secure an award abroad and enforce it here in the UAE against that local company," suggests Kilpatrick Stockton managing partner Tom Wilson.

"Bear in mind, however, that the law may not have application to disputes that are already in an arbitrational process before the new law is passed. It will be interesting to see how the law deals with this."

It has been said that the law is based on international arbitral legislation, as well as the United Nations Commission on International Trade Law's Model Law (UNICITRAL) and the IBA Guidelines on conflicts of interest.

"The federal law seeks to reinforce international standards to ensure that whenever there is an arbitration [hearing] in the UAE, the proceedings will be natural for all international practitioners and participants. Hence, one of the aims is to promote the region as an international arbitration location," says Systech International associate director Philip Adams.

It is feared, however, that although the model will apply to all arbitration, whether domestic or global, "the cut and paste exercise" of basing the law on international sources "will lead to anomaly and ambiguity," according to Riesenburg.

And, the draft law is not without its drawbacks, says Gillians: "The courts of the UAE will retain a higher degree of control over the arbitration process when compared with those of other countries."

But Riesenburg suggests that the draft bill will offer a fairer process for arbitral tribunals: "They will be given the autonomy that is arguably currently amiss. This includes the jurisdiction to deliver preliminary, interim, interlocutory, partial and final awards and costs," she explains.

"This does not however mean that parties will be barred from recourse to the court for urgent or interlocutory applications; which is the current practice.  How the two will be reconciled will be of great interest."

The draft law remains subject to consultation and legislators will be given the opportunity to amend details before the bill is passed. However, from the brief that has been seen so far, it seems that legal professionals are happy with the changes.

"All in all I would say that the majority of the changes which will be brought about by the draft arbitration law are, though subtle, welcome to the region," says Gillians.

"The key benefit of the draft law is that, being significantly more detailed than the current law, it will bring greater clarity as to the legal provisions which apply to arbitration in the UAE."

And, Wilson adds: "The law may steam-line the process for enforcing arbitration awards rendered here in the UAE."

Riesenburg also agrees that the model is "sound and progressive," but stresses the importance of front-end legal advice.

"Federal laws have their limitations, and indeed it is rare that any arm of the justice system will or should interfere with the parties' original intentions.  Intervention is the exception and not the rule," she says.

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